IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/12202.html
   My bibliography  Save this paper

Pay, Reference Points, and Police Performance

Author

Listed:
  • Alexandre Mas

Abstract

Several theories suggest that pay raises below a reference point will reduce job performance. Final offer arbitration for police unions provides a unique opportunity to examine these theories, as the police officers either receive their requested wage or receive a lower one. In the months after New Jersey police officers lose in arbitration, arrest rates and average sentence length decline and crime reports rise relative to when they win. These declines are larger when the awarded wage is further from the police union's demand. The findings support the idea that considerations of fairness, disappointment, and, more generally, reference points affect workplace behavior.

Suggested Citation

  • Alexandre Mas, 2006. "Pay, Reference Points, and Police Performance," NBER Working Papers 12202, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:12202
    Note: LS
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w12202.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(2), pages 255-283.
    2. Brown, Gordon D. A. & Gardner, Jonathan & Oswald, Andrew J. & Qian, Jing, 2005. "Does Wage Rank Affect Employees' Wellbeing?," IZA Discussion Papers 1505, Institute of Labor Economics (IZA).
    3. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-125, March.
    4. John A. Rizzo & Richard J. Zeckhauser, 2003. "Reference Incomes, Loss Aversion, and Physician Behavior," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 909-922, November.
    5. Justin McCrary, 2002. "Using Electoral Cycles in Police Hiring to Estimate the Effect of Police on Crime: Comment," American Economic Review, American Economic Association, vol. 92(4), pages 1236-1243, September.
    6. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-538, June.
    7. Ashenfelter, Orley, 1987. "Arbitrator Behavior," American Economic Review, American Economic Association, vol. 77(2), pages 342-346, May.
    8. Eric A. Verhoogen & Stephen V. Burks & Jeffrey P. Carpenter, 2007. "Fairness and Freight-Handlers: Local Labor Market Conditions and Wage-Fairness Perceptions in a Trucking Firm," ILR Review, Cornell University, ILR School, vol. 60(4), pages 477-498, July.
    9. Gul, Faruk, 1991. "A Theory of Disappointment Aversion," Econometrica, Econometric Society, vol. 59(3), pages 667-686, May.
    10. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    11. Levitt, Steven D, 1997. "Using Electoral Cycles in Police Hiring to Estimate the Effect of Police on Crime," American Economic Review, American Economic Association, vol. 87(3), pages 270-290, June.
    12. Bateman, Ian J, et al, 1997. "Does Part-Whole Bias Exist? An Experimental Investigation," Economic Journal, Royal Economic Society, vol. 107(441), pages 322-332, March.
    13. Gibbons, Robert, 1988. "Learning in Equilibrium Models of Arbitration," American Economic Review, American Economic Association, vol. 78(5), pages 896-912, December.
    14. Orley Ashenfelter & David Bloom, 1981. "Models of Arbitrator Behavior: Theory and Evidence," Working Papers 526, Princeton University, Department of Economics, Industrial Relations Section..
    15. repec:bla:scandj:v:97:y:1995:i:2:p:295-307 is not listed on IDEAS
    16. Alan S. Blinder & Don H. Choi, 1990. "A Shred of Evidence on Theories of Wage Stickiness," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(4), pages 1003-1015.
    17. repec:fth:prinin:219 is not listed on IDEAS
    18. Henry S. Farber, 1980. "An Analysis of Final-Offer Arbitration," Journal of Conflict Resolution, Peace Science Society (International), vol. 24(4), pages 683-705, December.
    19. Orley Ashenfelter & Gordon B. Dahl, 2003. "Strategic Bargaining Behavior, Self-Serving Biases, and the Role of Expert Agents An Empirical Study of Final-Offer Arbitration," Working Papers 857, Princeton University, Department of Economics, Industrial Relations Section..
    20. Orley Ashenfelter, 1987. "Arbitrator Behavior," Working Papers 599, Princeton University, Department of Economics, Industrial Relations Section..
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Orley Ashenfelter & Gordon B. Dahl, 2003. "Strategic Bargaining Behavior, Self-Serving Biases, and the Role of Expert Agents An Empirical Study of Final-Offer Arbitration," Working Papers 857, Princeton University, Department of Economics, Industrial Relations Section..
    2. Orley Ashenfelter & David E. Bloom & Gordon B. Dahl, 2013. "Lawyers as Agents of the Devil in a Prisoner's Dilemma Game," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 10(3), pages 399-423, September.
    3. John Burger & Stephen Walters, 2008. "Testing Fair Wage Theory," Journal of Labor Research, Springer, vol. 29(4), pages 318-332, December.
      • John D. Burger & Stephen J.K. Walters, 2006. "Testing Fair Wage Theory," Working Papers 0623, International Association of Sports Economists;North American Association of Sports Economists.
    4. Mahmood Araï & Gérard Ballot & Ali Skalli, 1996. "Différentiels intersectoriels de salaire et caractéristiques des employeurs en France," Économie et Statistique, Programme National Persée, vol. 299(1), pages 37-58.
    5. Sabrina T Howell & J David Brown, 2023. "Do Cash Windfalls Affect Wages? Evidence from R&D Grants to Small Firms," The Review of Financial Studies, Society for Financial Studies, vol. 36(5), pages 1889-1929.
    6. Veronique Genre & Karsten Kohn & Daphne Momferatou, 2011. "Understanding inter-industry wage structures in the euro area," Applied Economics, Taylor & Francis Journals, vol. 43(11), pages 1299-1313.
    7. Bai, Peiwen & Cheng, Wenli, 2020. "Relative earnings and firm performance: Evidence from publicly-listed firms in China, 2005–2012," International Review of Economics & Finance, Elsevier, vol. 66(C), pages 279-290.
    8. Campbell, Carl M., 2014. "The formation of wage expectations in the effort and quit decisions of workers," Economic Modelling, Elsevier, vol. 42(C), pages 313-322.
    9. David Dickinson, 2003. "Mediation, Walrasian Tâtonnement, and Negotiations as an Exchange Economy," Working Papers 2003-11, Utah State University, Department of Economics.
    10. Ernst Fehr & Martin Brown & Christian Zehnder, 2009. "On Reputation: A Microfoundation of Contract Enforcement and Price Rigidity," Economic Journal, Royal Economic Society, vol. 119(536), pages 333-353, March.
    11. Zoega, Gylfi & Karlsson, Thorlakur, 2006. "Does wage compression explain rigid money wages?," Economics Letters, Elsevier, vol. 93(1), pages 111-115, October.
    12. Jed Armstrong & Miles Parker, 2016. "How wages are set: evidence from a large survey of firms," Reserve Bank of New Zealand Discussion Paper Series DP2016/03, Reserve Bank of New Zealand.
    13. Jan Babecký & Philip Du Caju & Theodora Kosma & Martina Lawless & Julián Messina & Tairi Rõõm, 2010. "Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(4), pages 884-910, December.
    14. Zahid Mehmood Awan & Muhammad Khalil Shahid, 2011. "Organizational Commitment of IT Professionals in Public Sector," Journal of Social and Development Sciences, AMH International, vol. 2(6), pages 266-274.
    15. John G. Sessions & John D. Skåtun, 2017. "Performance-Related Pay, Efficiency Wages and the Shape of the Tenure-Earnings Profile," Manchester School, University of Manchester, vol. 85(3), pages 295-319, June.
    16. Aleksandra GregoriÄ & SaÅ¡o Polanec & Sergeja SlapniÄ ar, 2010. "Pay me Right: Reference Values and Executive Compensation," European Financial Management, European Financial Management Association, vol. 16(5), pages 778-804, November.
    17. Campbell III, Carl M., 2010. "Deriving the wage-wage and price-price Phillips curves from a model with efficiency wages and imperfect information," Economics Letters, Elsevier, vol. 107(2), pages 242-245, May.
    18. Franz, Wolfgang, 1993. "Unvollkommene Arbeitsmärkte in makroökonomischen Modellen: Eine Übersicht," Discussion Papers 1, University of Konstanz, Center for International Labor Economics (CILE).
    19. Campbell III, Carl M., 2008. "An efficiency wage approach to reconciling the wage curve and the Phillips curve," Labour Economics, Elsevier, vol. 15(6), pages 1388-1415, December.
    20. María Mercedes Adamuz & Clara Ponsatí, 2009. "Arbitration systems and negotiations," Review of Economic Design, Springer;Society for Economic Design, vol. 13(3), pages 279-303, September.

    More about this item

    JEL classification:

    • J0 - Labor and Demographic Economics - - General
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • D0 - Microeconomics - - General
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:12202. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.